Roopam Jain's Blog

Videoconferencing Trends to Watch

This week we published our 2011 videoconferencing endpoints research which points at the huge growth potential for videoconferencing. Global revenues for the videoconferencing and telepresence endpoints market reached $1.7 billion in 2010, growing at a robust 17.8%. The strong market growth in 2010 can largely be attributed to a surge in interest for videoconferencing to cut travel costs and enhance the communications experience. The overall outlook for videoconferencing is starting to look more and more attractive. As the economy continues to improve and the general interest in all things video keeps rising, IT managers are looking at the feasibility of rolling out “pervasive video”. Many vendors are touting the mantra “video is the new voice”, pushing the notion that simple voice calls will become a thing of the past. While mainstream adoption of pervasive video may still be a few years away, the demand drivers are all aligned for the market to pick up pace. Here are key trends and findings-

• The market has seen accelerated pace of new product developments, pricing shifts, as well as consolidation. While the market for room systems will continue to be healthy, the fastest acceleration will be seen in desktop and mobile segments. The spread of mobile and desktop video will feed into the growth of room-based systems. Vendors are carving a solid path to address an end-to-end video strategy that spans all the way from immersive and room-based video to desktop and mobile video.

• The small and medium business segment will likely become the next economic growth point in the future. SMB adoption continues to grow at a much faster pace than adoption by enterprises. Videoconferencing vendors are targeting the SMB customer by making products easy to install and use and by providing lower prices. High SMB penetration seen by LifeSize and Polycom in 2010 has resulted in stronger overall SMB data for the industry.

• In 2010, market growth was primarily driven by room systems. Most businesses perceive better ROI in multi-user room systems as compared to personal use executive systems. Executive systems are seeing heavy competition not only from software-based desktop video clients but also from the influx of enterprise tablets that are increasingly video enabled. While Executive systems will continue to remain under pressure, declining prices as well as evolution of new form factors such as the Avaya Desktop Video Device will boost growth.

• B2B and interoperability issues have taken center stage. As usage climbs up, customers are looking to maximize their ROI by making video extensible to an increasingly diverse base of endpoints and clients - with both their internal and external value chain. While there is work that still needs to be done, endpoint vendors are focusing on providing interoperability with other vendors’ solutions and service providers/carriers are introducing inter-exchange services that can connect their customers to users on other carrier’s networks.

• The mobility factor continues to gain unprecedented attention. The invasion of tablets in the enterprise will be strong over the next few years with a diversity of form factors. Faster, smarter, and more capable smart phones and the emergence of collaboration-ready enterprise tablets is fueling the interest in mobile videoconferencing. Additionally, the move toward 4G will help carriers deliver higher quality video.

• The growth of UC has had a tremendous impact. Video is being viewed as an essential element of a UC solution. Desktop video in particular is expected to shift from a standalone solution to a collaboration suite. Accordingly, adoption of desktop video will be impacted by the uptake for UC.

• The consumerization of IT and viral growth of video in the consumer market, along with rapid adoption of social networks are changing the way people communicate. These mega trends are also bringing down the cultural barriers that have traditionally restrained wider use of videoconferencing and are having a deep reaching positive impact on promoting video adoption. Green initiatives continue to be a key driver.

• Most businesses today do not have the network infrastructure to support wider deployments that require not only a high bandwidth data network, but also upgrades to existing video infrastructure, such as MCUs, gateways, management software etc. The immense growth seen in the endpoints market is increasing the demand for videoconferencing infrastructure and 2010 has already seen this trend.

• Videoconferencing in the cloud is a nascent market starting to evolve. New cloud services that combine hosted email, messaging, groupware, along with video and web collaboration will see greater adoption as users increasingly evaluate collaboration as part of a bigger enterprise communications purchase. These services will be available both as public clouds as well as private non-shared more secure and flexible clouds.

• The competitive landscape is fast evolving. Cisco TANDBERG solidified its position and continues to dominate the revenue market share. Polycom leads the market in terms of unit shipments and posted the highest growth in 2010 in the industry. A large part of Polycom’s success can be attributed to the strength of its product line and a well- executed channel strategy.

For further information and in-depth market metrics, forecasts, market shares and valuable insights see the full study titled “World Videoconferencing and Telepresence Endpoints Market: Market Gathers Steam as Customers get Ready for Pervasive Video” (code N8C3-64) on www.frost.com.